A lawsuit challenging conventional methods for mutual funds to collect marketing fees from shareholders cleared a significant hurdle last week in a New York federal court, The Wall Street Journal reports.
The plaintiff suing Bjurman, Barry & Associates and Bjurman and Barry Micro-Cap Growth Fund for charging excessive fees received a green light to proceed when the judge overturned a motion to dismiss the case.
The decision comes dangerously close to setting a precedent for shareholders to challenge mutual fund fees in court at a time when investment providers are facing regulatory scrutiny for improper trading practices. Investor advocates are also becoming more vocal about the practice of collecting marketing expenses, also known as 12b-1 fees, for mutual funds that are closed to new shareholders.
Experts are paying close attention to the lawsuit against Bjurman because it solely contests lofty 12b-1 fees in a fund that is closed to new investors. Other mutual fund providers now worry that a victory in the Bjurman case could open floodgates for other lawsuits. The case has survived, experts say, because the current regulatory climate is sympathetic to investors.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.